Next PACE Securitization Comes from Renewable Funding

The next offering of Renewable Funding is preparing its second securitization of Property Assessed Green Energy (PACE) bonds, according to Kroll Bond Rating Agency.

The deal, dubbed Golden Bear 2016-1, trust will issue a single, $122.9 million tranche of fixed-rate notes with preliminary ‘AA’ ratings from Kroll Bond Rating Agency. That’s on par with deals previously completed by two other PACE program administrators, Renovate America and Ygrene Energy.

The notes have an expected maturity of September 2042.

Nataxis Securities America is the structuring agent and bookrunner.

PACE is a means of financing energy efficiency upgrades or renewable energy installations for buildings. Governments or private lenders such as Renewable Funding provide financing to building owners and are repaid via an annual assessment on the owner’s property tax bill. These assessments are used as collateral for PACE bonds, which can then be securitized, giving the lenders money to put to work making more loans.

The notes to be issued by Golden Bear are secured by 347 PACE bonds issued by the California Statewide Communities Development Authority and the County of Los Angeles, California. These bonds are secured in turn by 4,804 PACE assessments levied against 4,463 residential properties in 36 California counties originated via the CaliforniaFIRST Residential PACE Program.

The average PACE assessment is approximately $26,389 with an average annual payment of approximately $3,097.

Typical of other PACE securitizations, the transaction benefits from three forms of credit enhancement: excess spread, or the difference between interest paid by Golden Bear notes and interest received from PACE bonds used as collateral; overcollateralization; and a liquidity reserve.

Renewable Funding, also known as Renew Financial, completed its first securitization, for $50 million, in September 2015. That deal was privately placed. So far this year, Renovate America, another PACE lender, has completed two securitizations this year, and seven in total. Ygrene Energy, another third lender, completed a private securitization last year and plans to issue two public deals this year.

Currently, Renew’s PACE clients are focused in California, but the company raised $81 million in equity capital in 2015 and 2016 and is expected to expand to Florida, Missouri, Colorado, and New York. “Senior leaders are experienced entrepreneurs with specific expertise in technology, governmental programs and energy-related businesses,” KBRA states in its presale report states.